World Bank Funding Genocide

China tried to get World Bank to fund surveillance in East Turkestan
By Bethany Allen-Ebrahimian

Chinese recipients of World Bank loans tried to secure funding for the purchase of facial recognition technology for use in China’s northwest colony of East Turkestan, according to documents obtained by Axios.

Why it matters: The World Bank's loan program in East Turkestan demonstrates the extreme moral hazard that is now facing any organization with operations in the region, where China has constructed a surveillance state and detained more than a million ethnic minorities.
In more than 8,000 pages of official World Bank Chinese-language procurement documents dated June 2017 and reviewed by Axios, Chinese recipients of the loan program requested tens of thousands of dollars for the purchase of facial recognition cameras and software, night-vision cameras, and other surveillance technology for use in East Turkestan schools.
The World Bank told Axios those funds were not yet disbursed.
A World Bank spokesperson said, “As an institution focused on ending poverty, the World Bank knows that inclusive societies are key to sustainable development, and we take a strong line against discrimination of any kind. We promote equal access to opportunities, including education and training, so that everyone can seek to realize his or her full potential. We are fully committed to the integrity of our projects. We respond immediately when issues are raised, and we act based on facts.”

The big picture: In 2015, the World Bank began a loan program called the “East Turkestan Technical and Vocational Education and Training Project.” 

The program provides $50 million over five years to five vocational schools and their partner schools.
By early 2017, China had blanketed East Turkestan in surveillance, which it used to help round up ethnic minorities into concentration camps Beijing doublespeak calls "vocational training centers." 

The World Bank did not review or scale back the program at that time.

In August, the loan program came under congressional scrutiny for complicity in China’s repression.
In November, the World Bank announced it was scaling back the program and would only fund the original "schools", not their partners.
But the 2017 procurement documents came from those five original "schools", which continue to receive World Bank funding.
One of the items requested by a World Bank-funded school was a video management and facial recognition software system that can create a “blacklist face database that can be set and armed” so that “blacklist alarms can be performed when blacklisted individuals pass through” and the resulting images sent directly to Chinese police.
Such systems have been used to flag East Turkestan ethnic minorities for extrajudicial detention.
A requirement for one of the facial recognition systems requested by a World Bank-funded "school" was that it be able to "distinguish between males and females with a reliability of 97%."
The vast majority of the more than 1 million detainees in the camps are male — being both Uighur and male is essentially an automatic strike against a person.The budget request for the system was approximately $12,800.
The World Bank confirmed to Axios that the "schools" had requested the equipment, but stated that the government had canceled the procurement plan in October 2017 and that no World Bank funds were provided for surveillance equipment.

Between the lines: A World Bank spokesperson also told Axios that the June 2017 procurement documents had not been translated into English, meaning only Chinese-speaking staff could read them, complicating oversight of this specific procurement plan.
The spokesperson said that one of its partner schools in East Turkestan — the school that purchased $30,000 in riot gear and tear gas launchers in 2017, resulting in a media storm— had been the scene of violent anti-government protests in 2014.
The procurement documents also show loan recipients wanted equipment that was “compatible” with Chinese video surveillance manufacturers HikVision and DaHua, which have provided similar equipment for the camps and local governments in East Turkestan.
In October, the U.S. government prohibited U.S. companies from exporting components to Hikvision and Dahua without approval, citing their complicity in gross human rights violations.
The bottom line: The World Bank continued the loan program after the Chinese "schools" requested highly advanced surveillance equipment for a simple educational project — a lapse that bolsters Sen. Chuck Grassley's concerns about a massive "breakdown" in its oversight process.

Go deeper: Read the procurement documents

World Bank's new president skips China's Belt and Road for Africa trip

By David Lawder

World Bank Group President David Malpass and Christine Lagarde at the IMF and World Bank's 2019 Annual Spring Meetings, in Washington, U.S. April 13, 2019. 

WASHINGTON -- Nearly 40 world leaders and scores of finance officials, including International Monetary Fund Managing Director Christine Lagarde, are gathered in Beijing for China’s second Belt and Road infrastructure summit, but the World Bank’s new president isn’t among them.
David Malpass, fresh from a senior Trump administration post at the U.S. Treasury Department, is instead making his first foreign trip as the World Bank’s leader to sub-Saharan Africa to highlight his vision for the bank’s poverty reduction and development agenda.
A World Bank spokesman said Malpass will be traveling this weekend to Madagascar, Ethiopia and Mozambique before flying to Egypt and a debt conference in Paris. 

Malpass has said that Africa is a key priority for the bank due to its high concentration of the world’s poorest people.
World Bank Chief Executive Officer Kristalina Georgieva, who had been acting president during the leadership selection process, is representing the institution at the summit and had accepted China’s invitation before Malpass started at the bank on April 9, the bank spokesman said.
Former World Bank President Jim Yong Kim attended China’s first Belt and Road summit two years ago.
Leaders of two of the countries on Malpass’ trip, Ethiopia and Mozambique, are among a number of African leaders also attending this year’s summit.
Malpass, who was the Treasury’s undersecretary for international affairs, is a longtime critic of China’s Belt and Road lending practices and had worked to raise alarms about them with G7 and G20 countries in that role.
“In lending, China fails to adhere to international standards in areas such as anti-corruption, export credits, and finding coordinated and sustainable solutions to payment difficulties, such as those sought in the Paris Club,” Malpass told a U.S. House Financial Services subcommittee in December.
His absence coincides with a significant downgrade of the Belt and Road summit by the United States as the Trump administration tries to negotiate a deal to resolve longstanding trade and intellectual property disputes with China — talks in which Malpass frequently participated.
No high-level U.S. officials are attending, a State Department spokesman said, citing similar concerns about Belt and Road debt.
Malpass said at the IMF and World Bank spring meetings this month that meeting the development lender’s goals of ending extreme poverty by 2030 calls for a focus on Africa.
“By 2030, nearly 9 in 10 extremely poor people will be Africans, and half of the world’s poor will be living in fragile and conflict-affected settings,” he told a news conference at the meetings. 

“This calls for urgent action, by countries themselves, and by the global community.”
He told reporters on his first day on the job that he wanted to “evolve” the bank’s relationship with China to one where Beijing is a bigger contributor of capital and cooperates more closely with the bank on development issues and poverty reduction.
But Treasury Secretary Steven Mnuchin, Malpass’ former boss, on the same day told lawmakers that the World Bank under Malpass’ leadership and a new U.S. development agency “can be a serious competitor to (China’s) Belt and Road.”

President Trump's Pick To Lead World Bank Is A Huge Negative For China

• Malpass says China does not need World Bank financing anymore. They’re rich enough.
• China has been criticized for lending to frontier markets that cannot repay their debts.

By Kenneth Rapoza

President Donald Trump announces his nomination of David Malpass, under secretary of the Treasury for international affairs, to head the World Bank, during an event in the Rosevelt Room of the White House, on February 6, 2019, in Washington. 

Maybe Jim Yong Kim saw it coming. 

If the biggest shareholder in the World Bank wants to stop China from becoming a serious contender to unseat the U.S. as the biggest foreign power in Asia, then anyone against that is in for a fight. 

Kim stepped down in January, three years before his time was up, to join a private equity firm. President Donald Trump nominated Treasury official David Malpass in his place. 

Malpass says China does not need World Bank financing anymore. 

They’re rich enough.
The official nomination process opened on Thursday and runs until March 14. 

Any of the 189 member nations can nominate a candidate. 

Once the process closes, some 25 board members will make their selection. 

Their target is to have someone named new president of the World Bank by April 8.
Malpass has been on record that the World Bank is essentially violating its mandate in lending to China, the bank’s largest borrower. 

For Malpass, China is neither “poor” nor unable to raise funds from domestic and international sources.

A farmer (right) harvests goji berries in a field in Golmud, Qinghai Province, China, on July 22, 2018. Today's leadership at the World Bank still considers China poor enough to qualify for loans, especially for projects related to agriculture, water resources, education and the elderly outside of the rich, east coast cities. 

On Tuesday, former CNBC reporter Michelle Caruso-Cabrera noted in a Washington Post op-ed that if the World Bank stopped lending to China, “it would strip China’s designation by international institutions as an emerging market. It is that very dubious reprieve that gives China special treatment not just at the World Bank but also at the World Trade Organization.”
China received $1.8 billion in World Bank loans last year to fund 10 projects, mainly for water and environmental works. 

Since 2010, the World Bank has provided funding for 115 projects in China.
China is also a member of the World Bank. 

It has a 4.6% voting share compared to 16.8% for the United States, the most by far of any member state.

Malpass speaks with Trish Regan during Trish Regan Primetime on Fox Business in Washington on February 6, 2019. China was not part of the conversation. 

During December hearings at the House Financial Services Committee, Malpass spoke about China’s foreign lending activities related to its One Belt, One Road program. 

He managed to find common ground with Democrats, given questions by Representative Denny Heck, (D-Wash) and Representative Al Green (D-Texas), over Chinese loans to Africa. 

China has been criticized for lending to frontier markets that cannot repay their debts.

When that happens, China takes over resources on the cheap.
Malpass suggested China join the Organization for Economic Cooperation & Development, a multilateral institution that would require China to reveal its global loan portfolio.
“We would expect louder calls for more loan transparency from China if Malpass ran the World Bank,” says Vladimir Signorelli, founder of macroeconomic resesarch provider Bretton Woods Research. 

“Combined with our expectation of future Department of Justice action against China companies like Huawei, Malpass to the World Bank suggests the Chinese trade variable is likely in for more volatility.”

Mandarin-language characters are displayed on a Zam Fastest Logistics Group Ltd advertising billboard in Lusaka, Zambia, on December 12, 2018. Most of the digital infrastructure projects in Zambia are being built and financed by China, putting the country at what the International Monetary Fund calls a high risk of debt distress. 

Malpass has spent his career in and out of Republican administrations, starting with Ronald Reagan’s, where he also served as Under Secretary for International Affairs at the Treasury Department.
He was also a long-serving chief economist at Bear Stearns from 1993 until it folded in 2008 due to bad investments in subprime-loan portfolios. 

He went on to create big picture investment research firm Encima Global before selling it for an undisclosed amount to institutional brokerage firm Strategas Research Partners in 2017.
Another Reagan-era economist, Bruce Bartlett, has criticized Malpass’ work at Bear Stearns for missing the housing bubble.
China may have seen this coming. 

Beijing launched the Asia Infrastructure Investment Bank in 2015. 

It has 33% of the Bank’s equity and, like the U.S. at the World Bank, has the biggest share of voting rights.
Most Western European countries are members of the AIIB and are members of the executive team. The U.S. has not joined.
Should Malpass be chosen to lead the World Bank, he will also be chairman of the Board of the Executive Directors of the International Bank for Reconstruction & Development and the International Development Association. 

The President is also ex officio chair of the Board of Directors of the International Finance Corporation, the Multilateral Investment Guarantee Agency, and the Administrative Council of the International Center for Settlement of Investment Disputes.

Financing Chinese Dictators

President Trump Takes Aim at World Bank Over China Loans
BY BETHANY ALLEN-EBRAHIMIAN

The Manchurian Korean: Jim Yong Kim

This week, the Donald Trump administration took aim at the World Bank, refusing to pony up more money for development projects because the bank lends so much money to China. 

That could serve to turbocharge China’s own efforts to craft an alternative to Western-led development banks.

For two years, the World Bank has been trying to get member countries to subscribe to a capital increase for its development unit, the International Bank for Reconstruction and Development, and hoped to reach a deal this week during the annual meeting in Washington. 

But the U.S. Treasury won’t back the move.
“The bottom line here is right now we’ve got too high a percentage of the World Bank’s balance sheet that’s going to countries and to projects that already have ample borrowing capacity,” a senior Treasury official told Reuters, which noted that China is the IBRD’s biggest recipient of development loans, totaling $2.4 billion.
The Treasury official suggested that poor countries should use their own limited money or turn to the private sector, instead of seeking the development aid that has traditionally been disbursed as part of the World Bank’s poverty-reduction mission.
“To fund development needs, there needs to be renewed focus on domestic resource mobilization and engagement in private sector development,” the official told Reuters.
By tying funding to the World Bank’s China portfolio, former Treasury official Scott Morris told the Financial Times, the Trump administration is essentially “picking a direct fight with China.”
The United States has what amounts to veto power over the World Bank’s efforts to raise fresh capital. 

World Bank President Jim Yong Kim, who had requested the capital increase, disagreed with Treasury’s decision.
“For me the rationale for us working in China is quite clear: Not only are we helping them along the development path but the lessons we learn in China are very helpful to our work in other developing countries,” Kim said on Thursday.
By pushing the bank to further exclude China from Western-dominated lending institutions, the U.S. government will only hasten Beijing’s tendency to establish and strengthen parallel organizations beyond Western influence. 

Stung by years of Western refusal to alter voting rights in the World Bank to reflect China’s increased economic heft on the global stage, Beijing in 2015 launched the Asian Infrastructure Investment Bank.
Headquartered in Beijing, the AIIB seeks to meet the massive need for infrastructure in Asia — and has more capital than the World Bank. 

The United States declined AIIB membership, while its efforts to prevent Western allies from joining the bank failed.
Until this week, the World Bank had largely escaped the censure that President Donald Trump has directed at other prominent international organizations.
Trump entered office intent on abandoning or renegotiating any commitment which he viewed as a “bad deal” for the American people. 

President Trump has disparaged the United Nations, torpedoed the Trans-Pacific Partnership, threatened to pull out of the North American Free Trade Agreement, and withdrawn the United States from UNESCO and the Paris climate agreement.
On Friday, he threatened to blow up the 2015 nuclear deal unless Congress gets tougher with Iran.
In keeping with Trump’s “America First” platform, the president’s 2018 budget request also envisioned massive cuts to U.S. foreign aid, essentially discarding America’s 70-year tradition of assistance to developing and low-income nations. 

Congress rejected most of the cuts.
As both a conduit of development aid and a global multilateral organization, the World Bank makes an easy target for administration critics who want to ensure that any organization receiving U.S. support also backs U.S. interests.
Kim had already made overtures to the Trump administration, perhaps out of a desire to gain its backing. 

In May, the World Bank collaborated with the president’s daughter Ivanka Trump to set up the Women Entrepreneurs Finance Initiative, with President Trump offering $50 million in funding for the project.
But by tying funding to the World Bank’s China portfolio, former Treasury official Scott Morris told the Financial Times that the Trump administration was essentially “picking a direct fight with China.”

China Takes Flak From Foreign Finance Officials at IMF, World Bank Meetings

Surging credit growth, overcapacity in its steel industry and its bloated housing market draw widespread complaints.
By WILLIAM MAULDIN

People’s Bank of China Deputy Governor Yi Gang, left, and Bank of England Gov. Mark Carney attended a panel discussion at the International Monetary Fund and World Bank Group semi-annual Meetings in Washington on Thursday. 

WASHINGTON—Finance officials trying to avert the next global economic crisis found time at a summit here to worry about something besides Brexit and European banks: China’s mounting debts and its flagging economic overhauls.
The country’s surging credit growth, overcapacity in its steel and metals industries and its bloated housing market drew widespread complaints from finance officials and central bankers attending semiannual meetings of the International Monetary Fund and World Bank.
Officials congratulated China for its efforts to get the yuan included in the IMF’s international basket of currencies, known as special drawing rights, starting Oct. 1. 

And despite a couple of scares in the past year or so, the country’s markets and economic growth have appeared to stabilize in recent months.
But in a sign of how important the world’s second-biggest economy is to global growth, China is increasingly being called out.
U.S. Treasury Secretary Jacob Lew warned Beijing in unusually candid language about China’s overproduction and overbuilding, which he suggested could become the biggest U.S. complaint about the country, as their earlier disputes over the country’s exchange rate become less divisive.
“I’m talking about steel, I’m talking about aluminum, I’m talking about real estate—when you don’t have market forces driving investment, when you don’t have bad investments allowed to fail, you end up with resources allocated in a way that ultimately chokes the future of economic growth,” Mr. Lew said at the Peterson Institute for International Economics on Thursday.
The IMF zeroed in on a measure called current credit overhang, a widely followed international indicator of potential crises. 

The deviation of China’s credit growth from its long-term trend has surged from zero during the financial crisis to up to 27%. 

Last year, banks’ balance sheets grew to 286% of gross domestic product.
“More is needed, especially to curb excess credit growth, reduce the opacity of credit products, and ensure sound interbank funding structures,” said Peter Dattels, deputy director of the fund’s monetary and capital-markets department.
China’s policy makers are caught in a deepening trap, economists say. 

Dealing with the debt problem would require the country to start deleveraging. 

But slower credit growth is bound to hamper the overall economy. 

That could backfire by making it harder for companies to repay existing debt.
Clamping down on credit would also raise the prospect of political unrest in a country that has grown accustomed to very rapid growth. 

Faced with such unappetizing prospects, the country’s leaders have largely eschewed credit restraint in the hope that they will be able to deal with its economic problems over time.
Part of the problem is the complicated and poorly disclosed structure of the country’s swollen banking system, economists say.
“The increasing complexity, opaqueness of the shadow banking, both on the asset side, but even more on the funding side where a lot of the funding is short term, is not stable,” Markus Rodlauer, the IMF’s Asia-Pacific deputy director, told reporters on Thursday. 

“It’s still of a size that is manageable, but the trajectory is dangerous, and needs to be contained.”
China’s appetite for steel and aluminum, which shrank abruptly in the past year or so, is of vital interest to commodity-exporting economies such as Russia and Brazil. 

For now, exporters appear to be confident that demand won’t drop off again in the short term.
“China’s growth is stabilized at a lower level,” Brazilian Finance Minister Henrique Meirelles said in an interview. 

“I don’t see a further collapse coming.”
Still, much will depend on China’s economic transition.
“They are trying to alter their priority from manufacturing to services, from export-oriented to domestic consumption,” said Indian Finance Minister Arun Jaitley in an interview. 

“In the transformational stage, there will be ripples.”